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Control system integrators confident about automation industry outlook in 2013

Two-thirds of respondents in global survey expect revenue growth.

By Josh Bond, Contributing Editor
February 21, 2013 - LM Editorial

The results of a global survey indicate the majority of independent system integration companies are optimistic about the automation industry’s prospects in 2013.

Conducted jointly by J.P. Morgan and the Control System Integrators Association (CSIA), the first-ever survey of system integrators reached out to nearly 1,800 professionals worldwide in the automation and control industry. The results suggest that more manufacturers will look to experts like CSIA members for help in managing risk and automating their industrial equipment and systems.

Key findings include:

• 69% of system integrators expect revenue growth this year. One-quarter of those look for gains of 15% or more.
• 85% believe demand for integration services will increase or remain steady in 2013.
• More than 70% say projects that had been delayed or cancelled will resume if there is no negative change in economic trends.
• Among the industries driving the activity are automotive, oil and gas, food and beverage, chemicals and energy.

One of the survey’s participants is Bill Pollock, CEO of Optimation, a full-service integrator employing 500 people across 12 international locations and capable of handling projects from concept to completion. With customers such as Kodak, Wegmans Food Markets, Halliburton and 3M, Pollock said Optimation expects growth in line with the overall survey responses.

Pollock said he has seen growth in all global markets, but noted an increased return of manufacturing to the United States from Mexico and China. Between a strong dollar exchange and the influences of labor and shipping costs, domestic manufacturing is becoming more appealing, he said.

After Optimation was founded as a software provider, Pollock said its customers’ desire for one-stop shopping has driven Optimation to become full-service providers, from design to fabrication to installation.

Pollock said he didn’t see many delays or cancellations until December. “There was a certain amount of ‘wait and see’ as we approached the fiscal cliff,” he said. “That softness around year end hasn’t quite been overcome. Businesses are still trying to figure out how to play the game given this set of rules.”

Robert Lowe, executive director of the CSIA, said the numbers were promising, but he had his concerns. “A number of projects were put on hold during the global slowdown in industrial production,” Lowe said. “As a result, our integrator members are seeing pent-up demand that will release as projects come back on line.”

He looked to the next survey, to be conducted in March, for indications that delayed projects would resume. Lowe said he was also surprised by responses that showed a low level of interest in manufacturing execution systems (MES). “Business intelligence is important, and relies on MES, but customers don’t seem to be embracing it.”

Overall, Lowe said that despite some concerns about inflation in 2014, CSIA members report business conditions are generally good, and there is optimism in the industry for the coming year. “Control system integrators play an increasing role in the delivery of automation due to end-users reducing staffs and their desire for independent views of potential solutions,” Lowe said. “About 15% of all automation and software is implemented by independent integrators. As a result, CSIA has become a valuable resource for end-users looking for integrators.”

Another survey participant and CSIA member, Ken Merrill, is engineering manager for Winchester Industrial Controls. Merrill said the company expects to again grow by 20% in 2013 and its 25 employees specialize in materials handling projects. Merrill said he has seen an increase in the number of retrofits and upgrades, and compared the trend to the automotive industry. “When the economy gets tough, car sales slump but parts sales pick up,” said Merrill, who suggested his customers’ selective and targeted spending patterns might not fully recover for a few more years. “There’s interest even among those companies that might not be thriving to still make process improvements. As technology evolves, there’s always a way to do something faster and cheaper.”

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About the Author

Josh Bond is an associate editor to Modern. Josh was formerly Modern’s lift truck columnist and contributing editor, has a degree in Journalism from Keene State College and has studied business management at Franklin Pierce. Contact Josh Bond